MERCANTILE Blog: MarketInsight, Sept. 26, 2016

Marlene BoerschMarket Insight

Major grains & oilseeds markets

The grain and oilseed markets appreciated for most of last week prior to turning lower on Friday. There was good cash wheat business during the week and more USDA registrations of soybeans. Weather was damp in parts of the US (delaying harvest), and more problems are expected in the coming week. Funds were inactive as expected, reportedly looking for opportunities to cover-shorts versus selling any more. China announced a 34 percent duty on DDGS imports, which in our view could mean more corn or soymeal imports to that country, although the market viewed it as bearish.

Funds: Funds reportedly did very little during the week and were not a market factor.

Soybeans

  • Soy-complex prices were lower on Friday following a strong week. Volume was not very good; futures could be stronger this week and we expect more private sales to be registered with USDA.
  • We do not see anything that is too bearish in the balance sheet, and while the South American crops are not made, we cannot get too bearish on the soy-complex.
  • We expect to see much stronger oil share as we see a shortage in crush capacity.

Canola

  • The dockage issue has been solved and we are surprised it took so long considering that Canada/China trade balance shows a $55 byn dollar balance in favor of China. It is solved through to 2020 and business is being concluded.
  • Canola is fully competitively priced versus other oilseeds and should attract maximum demand when considering that production in China, EU, and FSU are all lower.

Wheat

  • Quality problems with the 16/17 wheat crop appear to be spreading, with poor quality being reported in Australia and China.
  • India’s 16/17 purchase have risen above 1 myn tonnes with the trade talking 3-5 myn tonnes.
  • It is good to see US wheat trading into Middle East destinations at last and at premiums for quality wheat. There is a shortage of quality wheat and big supplies of low quality for the current crop year.
  • It is likely we will have two markets for wheat with large spreads between feed and milling.

Durum

  • Though the domestic balance sheet is easing, global production will fall 700k mt on the season per AAFC to 38.4 myn mt; they forecast global 16/17 carryout will increase 500k mt to 8.8 myn mt – larger, but not burdensome. Quality will be in demand this season.

Feed Grains

  • More rain during next week may have adverse effect on US corn but global supplies are more than adequate at this stage. We will not see any improvement in corn prices until harvest is completed.

Peas

  • New oversea sales are going to be made at lower levels, and will not likely generate the same prices to producers as seen earlier.
  • Because production problems recently, prices for Australian chickpeas have started to increase.

Lentils

  • There are currently two dynamics at work in the market:
  • The positive side for growers who have managed to harvest good quality lentils is that these will be tight; low grade lentils will be ample).
  • On the negative side, production of greens is up in Canada as well as in and the U.S. and pulse prices in general are under significant pressure because the demand-pull from India for new purchases is way down.

Canaryseed

  • At only 129.6k mt, the model based StatsCan production number is lower than their previous number by 16k mt. If true, exports would have to drop below last year’s level. Most are waiting to get a better sense of actual yields before reacting, and the market is continuing to take it’s lackluster course.

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